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02 Dec 2021
The Honourable Prime Minister of Papua New Guinea James Marape, Minister for Petroleum, Mr Kerenga Kua, Minister for Mining Mr Johnson Tuke, Treasurer, Mr Ian Ling-Stuckey, Minister for Energy, Mr Saki Soloma, Australia Minister for International Development and the Pacific Senator the Honourable Zed Seselja, other representatives from Government, our key development partners who have supported us through very challenging times, fellow colleagues from Industry, Private and Public Sectors, our landowners and key stakeholders, ladies and gentlemen.
It is an honour and a real privilege to represent Oil Search today not only to give a business update but to share a bit of our history and our experiences of operating in Papua New Guinea. In line with the theme of our Conference, ‘Resource Industry – Making it work for Papua New Guinea’, I will also speak directly to the power of collaboration and partnerships with government, the industry, communities, and other stakeholders and how these meaningful partnerships are contributing to improvements in socio-economic outcomes at present and beyond our projects.
Before I continue, I would like to acknowledge the Prime Minister for his support of the industry as a key partner and the assurance from government for continued investment in Papua New Guinea.
A proud history in Papua New Guinea
I begin with a brief history of Oil Search’s origins to highlight our sustained commitment to Papua New Guinea and our local communities.
Exploration in PNG began during the First World War initially in the lowland areas of Papua. After the First War, Oil Search was incorporated and commenced its exploration efforts in 1929. The Company then joined BP and Mobil to form Australasian Petroleum Company Limited in 1938. The first well had just commenced drilling at Kariava in Gulf Province in 1941 when the Second World War broke out in the Pacific. APC had to suspend activities and relocate to Melbourne in 1942. After the war, the company returned to PNG in 1946 and resumed drilling.
Despite some early gas finds in the 1950s and 1960s in the Gulf areas, it was the opening up of the Highlands Foldbelt in the 60s and 70s that led to initially gas, and then oil discoveries in the 1980s at Hides, Kutubu, Angore, South East Mananda and P’nyang when large helicopters were introduced to allow access into our remote Highlands. Puri 1, which spudded in 1957, was the first well in the world to be drilled entirely with helicopter support.
Oil production, operated by Chevron, commenced in 1992 and further discoveries at Gobe and then Moran were commercialised through the early to mid-1990s. The Elk-Antelope gas discovery was made in the early 2000’s and of course the sector has seen the development of the PNG LNG Project which began production in 2014 ahead of schedule.
At this juncture, I take the opportunity to pay tribute to late Imbi Tagune who until his untimely passing, was the General Manager Client Services at MRDC and whose tireless efforts played a vital role at the commencement of the Kutubu oil project and our ongoing stakeholder collaboration with Government, our landowners and development partners in this space. I also honour the memory of other late colleagues who have recently passed and acknowledge their contributions to the development journey of Oil Search.
Persistent explorer (a sustained commitment >90 years)
For the resource industry, we operate in some of the world’s most challenging terrain and as many of you know, apart from the road infrastructures, we rely heavily on aerial support. For Oil Search, the cost for heli-supported exploration wells in the Highlands is between US$100million to 150million per well whereas, the probability of commercial success in PNG is about 1 in 10. Despite the business challenges, there have been opportunities as we have remained consistent in our efforts and maintained our PNG focus and commitment. When others exited PNG, Oil Search remained.
And, it certainly has been a long road to success. It took the Company more than 60 years to generate revenue from our exploration and development efforts however, the last 30 years has seen Oil Search grow into a significant energy company and we remain steadfast in our commitment in generating shared value for all our stakeholders.
As an upstream energy company, understanding and managing the risks and opportunities posed by energy transition pathways is critical for our long-term success. We acknowledge the PNG Government’s ambitious efforts and the governments of other jurisdictions we operate in for the prominence given to the science of climate change. At Oil Search we are committed to delivering low-cost, high value energy that meets society’s needs.
That is our purpose.
And with a focused portfolio, our ambition is to be the preferred energy company for all stakeholders.
Strong PNG Country Presence
Since 2003, we have been the operator of all PNG’s producing oil fields. Our facilities, pipelines and licences straddle the Southern Highlands, Hela, Gulf, Central and Western provinces. The scale of our operations reaches across one million hectares of land, 8 local level governments, 492 villages, approximately 35,000 landowners, 13 language groups and hundreds of clans and incorporated land groups.
Our People and Our Way
At Oil Search, we know our long-term strategy is underpinned by one of our business objectives – to become the trusted and preferred employer and partner of choice.
Our commitment to supporting, empowering, and enabling our people is sustained by our diversity and inclusion strategy and our plans for succession management. Through our training and development programs, we are helping to expand the national skills base of which I am pleased to say that 88% of our PNG team are Papua New Guinea citizens and almost 80% of leadership roles in PNG are filled by Papua New Guinean leaders. In terms of gender diversity, we will continue our efforts to further improve the representation of females in the oil and gas sector. In 2020, 21% of senior management level roles were held by women while our graduate program had 58% female representation.
At Oil Search, we are committed in providing a safe work environment and protecting the mental and physical wellbeing of our employees and contractors. This is our duty of care and in an environment exacerbated by a global pandemic, we rely on our dedicated team of Medical and Occupational Health Service professionals at each of our project sites in PNG including Port Moresby and Australia to provide our personnel with the best medical and healthcare.
Apart from the free medical care at each of our site clinics, we strive to play a leadership role in employment practice in areas such as paid parental leave, first home ownership and supporting employees who are affected by family violence. And through our ongoing support of the Bel isi PNG initiative and membership to the Business Coalition for Women, we are receiving additional resources and transformational tools to support positive change in the workplace, in homes and communities.
With our core values and behaviours of One Team, Stakeholder Focused, Courageous, We Deliver, and We are Sustainable, Oil Search will continue to provide a supportive and collaborative workplace where every employee feels respected and recognised. The next phase of our journey will see us continuing to prioritise activities that support our leaders in role-modelling our inclusive culture and behaviours or pasin as we say in Tok Pisin.
This is our sustained commitment.
Quality assets and resilient operations deliver strong performance
The successful delivery of our growth relies on sustaining an accountable, high performing culture and looking after the safety and wellbeing of our people. As a result of our strict adherence to COVID-19 protocols, including early quarantine detection and isolation, our safe and reliable operations have been maintained despite the impacts of COVID-19.
Our third quarter operating revenue was US$409 million, up 12% from the previous quarter. This came off the back of a solid production performance in the previous quarter through a lot of hard work and the dedication of our people. I would like to take this opportunity if I may to recognise all Oil Search employees and contractors, our landowner company leaders and the local area communities in each of the Petroleum Development License areas we operate, our medical and the field operation leadership team, COVID-19 action taskforce and our vaccine advocacy team for going above and beyond as One team to deliver through these very challenging times.
The PNG LNG Project, a world class asset with a world class operator in ExxonMobil continued to perform above nameplate production. At Oil Search, we progressed our business improvement initiatives including process safety and operational excellence. I will share with you few of these initiatives.
Papua progressing towards FEED in 2022 and FID 2023
At present, good progress is being made across all our major growth projects. We are seeing a ramp up of Papua LNG project activities as the operator targets FEED entry in 2022.
Operational highlights – North West Moran
I would now like to share few of our operational highlights. The first is the North West Moran Flowline Repair which was completed at the end of 2020. When the 2018 7.5 magnitude earthquake devastated many local communities, it also caused significant damage to three of our production wells at the Agogo Production Facility.
We commissioned a major project to reconstruct the North West Moran flowlines and repair damage to the impacted well pads. Following a huge collective effort by various teams in a remote setting, the North West Moran flowlines were reconnected with aerial support, six months ahead of schedule.
This project and the outcomes that have been delivered closely align with our Company purpose of delivering low cost, high value energy that meets society’s needs.
Oil Search Integrated Operations Centre
Another achievement which I am really pleased to announce is a first of its kind ‘Integrated Operations Centre’ for Oil Search and Papua New Guinea. Established recently in the Oil Search head office in Port Moresby, the ‘Centre’ has been designed to drive safety, production, and cost performance by leveraging on technology to create a robust connected workforce through live feed to CCTV at Oil Search production facilities in the Highlands, digital whiteboards, 3D models, safety and reservoir performance data among others. The ‘Centre’ empowers our Port Moresby based technical staff to directly work with and support the Oil Search field operations.
It took a significant team effort to deliver this first for Oil Search and for Papua New Guinea. Part of the Project Team is a young Papua New Guinean engineer Ali Manasingkec who led the Installation and Commissioning efforts. Ali joined Oil Search through our Graduate Development Programme in 2019 and we are proud to see in-house talent such as Ali advance in their roles. Ali will be instrumental in evolving the data and visualisations to improve the real-time support for our production facilities.
Strong sustainability foundations
Sustainability is embedded across the business and sits at the core of all decisions.
In 2020, we took significant steps to define an overarching Sustainability Strategy and create a model that clearly represented the elements and boundaries of sustainability, providing a framework to engage with external stakeholders about key sustainability risks and to measure our performance.
The Sustainability Strategy sees Oil Search focus its sustainability efforts under a 7-pillar sustainability model for action with a series of clear commitments on Climate, Environment, Community, Health & Safety, People, Integrity and Economic sustainability to deliver short to medium term sustainability outcomes.
Oil Search was recently recognised for its efforts and commitment to sustainability. We were ranked in the 92nd percentile of all Oil and Gas Upstream & Integrated participants, with an improved score of 71/100, up 11% on 2020 by the Dow Jones Sustainability Indices; from Sustainalytics ESG; a Risk Rating of 6 out of 260 of global oil and gas producers and we were included again on the GivingLarge Top 50 list for 2021. Companies are selected for inclusion in the Dow Jones Sustainability Indices, S&P 500 ESG and several other sustainability indices in part based on their results in the S&P Global Corporate Sustainability Assessment (CSA).
Inclusion in the DJSI Australia is an outstanding achievement for Oil Search and reflects our absolute and sustained commitment to a sustainable future as the preferred energy company for all stakeholders.
We are determined to play a constructive role in the energy transition through the responsible delivery of low cost, low GHG intensity energy; we have set a goal of reducing the GHG intensity of our operated assets by more than 30% by 2030; we aim to be a net zero energy company by 2050; we will minimise our environmental footprint by developing assets close to existing infrastructure where possible and ensuring that there is no net loss of biodiversity in our new projects, We also remain committed to our communities and have a renewed focus on partnering with key stakeholders to support youth and facilitate a better, independent and self- sustaining future for the communities we work in. At Oil Search, we are also committed to raising the bar on all our Health & Safety, People & Integrity outcomes and remain focused on ensuring the resilience of our business through Economic Sustainability practices.
Supporting state economy and building stronger communities
Our investment in PNG goes much further than straight taxes, royalties and development levies. In 2020, we contributed K1.5 billion to socio-economic contributions in PNG. This includes payments to PNG Employees, Government, Landowner and Supplier companies, Shareholders and Community Investments. We paid K86 million in community investment in 2020 including K36 million to the Oil Search Foundation. Between 2010 to 2020, we paid K2 billion in contracts to landowner companies, and we delivered 280 projects under the PNG Government General Infrastructure Tax Credit Scheme at a cost of K524 million in the areas of education, health, transport, district administration and law & justice. We have also paid more than K3 billion in taxes between 2013 to 2020.
At Oil Search, we also publish what we pay through the Extractive Industries Transparency Initiative.
I acknowledge Minister Kerenga Kua and Government for the positive steps taken this year to ensure landowner benefits are paid on time.
Committed to a sustainable future for all our stakeholders (through education)
Earning and maintaining the trust and support of local communities and other stakeholders is critical to Oil Search’s long-term success. Our approach as a responsible member of our communities is underpinned by strong, clear human rights commitments. The delivery of social value is embedded in our business strategy.
Part of our DNA is built on the right thing to do but also a real community development programme that addresses the challenges in the communities in which we work and the social stresses that can lead to project disruption.
Our sustainability planning process starts with the end in mind, of building towards a future sustainable state for landowner communities. This includes active multi-stakeholder approach and strategic engagement.
Here are few examples.
Access to a quality education at all levels underpins progress in all other development areas. With over 120 schools in our project footprint areas, we are helping to connect young people with education opportunities, training and skills needed to secure a bright future, sustain their livelihoods, and support their communities.
In 2020, through the Oil Search Foundation, we helped achieve an 82% increase in the number of children completing literacy classes in partnership with the Australian and PNG Governments. We know we are making a meaningful contribution towards social and economic development by investing in education.
The power of partnerships (through business development)
All our projects provide shared opportunities to our local landowner companies. Work carried out by our landowner companies is fundamental to our ongoing operating success and project stability.
This work provides employment and skills training to many thousands of people who live within the communities where we operate. Oil Search alone paid US$700 million or K2 billion in contracts to landowner companies between 2010 to 2020. Successful interaction with our lancos provide a bridge to our community groups in providing not just revenues and employment but also a tool for respectful communications and engagement with our people, including the youth in the community.
We also provide technical support towards an innovative community piggery enterprise known as Wonderland Agristock Limited. The enterprise is owned by five key landowner companies in our operating areas and aims to build the local economy, improve local community accessibility to agricultural markets and expand income opportunities.
The power of partnerships (through provision of cost-effective power)
Power remains one of the most significant development and social issues for people in PNG. Power is fundamental to economic and social development and underpins activities which can improve lives.
The PNG Government has recognised the importance of the availability of power and has introduced a policy to rapidly and materially increase access to electricity within PNG. To make this happen, the country needs competitively priced, reliable, domestic power solutions.
Oil Search has consolidated all of the Company’s power activities into a single business entity, ‘Oil Search Power Holdings’ and in close collaboration with Kumul Petroleum Holdings Limited, we aim to be part of the power solution to advance the initiatives that can deliver scalable, reliable, and competitively priced power to PNG’s communities, businesses, and industry.
The power of partnerships (COVID-19 response and maintaining our commitments)
While our absolute focus is on the safety and wellbeing of our workforce, we will continue to play a part in PNG’s fight against COVID-19.
The Oil Search Foundation has helped deliver 12.4 tonnes of COVID-19 personal protective equipment for health staff in three supported provinces. In partnership with the Government and Provincial Health Authorities, we were able to reach targeted populations in our project areas and boost COVID-19 vaccine uptake. I will speak more about the Foundation’s reach and impact shortly. We are also assisting the PNG Government through dedicated industry task force with supply chain and logistics as requested.
In 2021, we renewed our major sponsorship of the national women’s rugby league team, the PNG Orchids who are currently ranked 4th in the world and through the PNG LNG Project along with ExxonMobil and other partners, we are also supporting the PNG Kumuls, our national men’s team. Our financial support to the National Football Stadium enabled the PNG Rugby Football League to continue its commitment in developing the code in PNG and utilising sport as a platform to instil values and drive positive behaviours.
This year, we continued extending our reach in cancer education and through our partnership with the PNG Cancer Foundation, more than 10 outreach programs on women’s health and cancer prevention were conducted over the past two months. We also funded initiatives to promote economic livelihoods, law and order, women’s protection and empowerment, clinical provision and to address family and sexual violence as many of you know is a huge problem in PNG.
By playing a vital role in the economic and social development of PNG, our sustainable development programmes are improving development outcomes for the people of PNG and help maintain our operating stability.
The power of partnerships (Oil Search Foundation)
In 2015, we formed the Oil Search Foundation from the Oil Search Health Foundation to provide improved health services, education, youth and women’s empowerment and protection in our project impact areas. Through the Foundation, our strategic partnerships play a key role in providing practical solutions to development challenges in PNG – e.g., Over the past 6 years, the Foundation has contributed to the following in our project impact areas which you can see on this slide. I will mention a few.
Establishment of the Hela and Gulf PHAs with OSF Directors at one stage chairing all three PHAs. Hela is now in the top 6 performing provinces and has increased supervised deliveries by 20% between 2018 to 2021. Gulf PHA has improved immunisations significantly from 19% coverage in 2019 to 32% in 2020. Southern Highlands improved immunisations by 7% and is on track to maintain this is 2021
We have administered over 1 million vaccinations for children under 5 and for polio up to 15 years: one of the highest coverages in the country. As we know, childhood vaccinations are crucial to prevent disease outbreaks, public health emergencies and unnecessary deaths.
15,000 babies safely delivered in supervised deliveries. Some health facilities in remote areas of Hela have gone from no deliveries at all to over 50 safe deliveries each year.
Kikori District Hospital consistently exceeds national targets for antenatal visits.
Family planning services have increased by 25% across our PIAs following training of 30 staff by Marie Stopes PNG between 2018 and 2020 and,
We have also trained 3000 health workers in a wide range of areas including COVID safety measures and use of PPE, facility-based budgeting and how to use data for planning
Of course, none of this would be possible without our partnerships.
In summary, we will continue doing everything that we have done including engaging with and contributing to the community within which we work, and we will do that either as a stand-alone company or as part of a larger merged entity if that comes to pass.
On behalf of everyone at Oil Search, both past and present, thank you for all your support. We are proud of what we have achieved together.